Ardour Capital Investments (ACI): Tony Aoun, you are the CEO of Vycon Inc., a clean tech/energy storage/flywheel business based in California. You have just completed the successful IPO of your company in London, on the AIM market, after a global roadshow. Congratulations and welcome.
Tony Aoun (TA): Thank you. We're quite excited about the IPO process and also liked the fact that we were able to visit with investors from all around the world basically. The roadshow took us to Zurich and Geneva and London, obviously, and also New Zealand and Hong Kong, Paris and the US - so we've seen a global interest in the company and we're grateful for the investor support. And that fits in with the business model, where we are indeed global in the suppliers we deal with and our served markets.
ACI: Vycon has high cycling energy storage technology with applications in three multi billion dollar global markets: Ports, Rail, and Uninterruptable Power Supply. Tell me Tony, what does your technology do and why is it so unique?
TA: Our technology is unique in the fact that it is able to be deployed in these several markets that we're talking about. Initially, we going to be focusing on the back-up power market, the rail market and also cranes. Not many products are able to cross that span of industries in their global scale. We're able to do something different for each one of those markets. For example, in the back-up power market, we are a temporary energy storage device that's very responsive and extremely reliable, to protect them when there's an outage and allows a seamless transition until the generator is started or the utility comes back on. And in this case we displace old and ageing batteries that require a lot of maintenance and disposal frequently. In the crane application, we're able to go on board mobile cranes used in ports across the world today. And those cranes are powered by diesel engines, so we're able to reduce the dependency on the diesel engine by recycling energy. And in the rail application, we are also an energy recycling device, but in this case we help them reduce electricity consumption which also reduces the need to generate, upstream at the generation, so there ends up being an environmental theme to the products of being a clean technology.
ACI: What are the exact benefits for the customer of your technology in the crane market?
TA: For the crane application, the benefits are several. But what our customers are originally seeking is basically fuel reduction, operating costs reduction, and in some cases, they're under mandates to reduce emissions, and we think that emissions reduction is really becoming of an interest on a global basis. With our system being installed in the crane application, we can retrofit existing cranes - and there are several thousand of them around the world - or we can install the system on board a new crane that ends up being in the hands of the port operator. They end up using wasted energy that the cranes today have been designed to generate in the lowering cycle of the container and we capture the energy and feed it into our system and use that to power up the next lift cycle continuously, throughout the day, Some of these port operations run 20 hours a day, seven days a week, so it's a sizeable amount of fuel that gets used. They can save as much as 20 to 25% of fuel and if they elect to put our system on, they can also reduce their generator size, and if they reduce the generator size they get an additional 15 to 20% saving. So cumulatively it's a sizeable reduction in fuel, which ends up being the return on investment that pays for the device. But at the same time they get significant reductions in emissions, and if they're under mandates then they must have systems like that. And equally they get other soft benefits, like productivity enhancements and maybe less maintenance on their generator and things of that nature. But there's enough in the fuel savings ROI if you will, to attract industry to buy our device.
ACI: Your first sales were in California , where else are you seeing interest?
TA: Our first sale was to a port operator in California and there are roughly 20 port operators in California. Some of them are divisions of parent companies that operate around the world. So we're seeing, as we make a sale within our close proximity market, that we also draw interest from the global port operators. So, the crane market is truly global and the port operators themselves run global operations, so if you make a sale to one of their divisions, eventually headquarters will find out about it and they will adopt the solution we would expect. Or you can have a case where headquarter is navigating the "what's the right solution for the industry?" - they come to us, we agree on a global programme and they do a product roll-out across their ports for a retrofit. But that same thing can also apply to a back-up power market and the rail which both tend to be global in scale as well.
ACI: How are you going to use the proceeds from the IPO?
TA: Proceeds will go into two main categories. As we have launched the crane and back-up power products in mid 2006 or so, we're seeing an increase in demand and we've started sales. But now we're on a momentum to increase sales and output of the products this year. So we need to increase business capability to ramp up production and working capital related to that. And we also believe that we want to leverage the technology, which is able to be scaled up to a larger box, that will then serve the existing customers with complementary solutions and puts the company in a position where we can sell multi-unit configuration and that larger product and also gives us access to the rail sector which we are not serving today because it needs a bigger device. So the proceeds will go to a scale-up of a larger product.
ACI: When do you expect to have the next generation product?
TA: We believe that this undertaking is roughly 15 to 18 months of building prototypes and doing design validation testing. This is a product line expansion, so it's not a research project. It's more a case of development and packaging. So it's a very short time to market and we'll build on what we have already done. This is a significant priority for the business going forward. My staff and the company is expecting much more direct involvement from myself and others on the team to manage this effort and keep us on track. I have relative experience in having launched several new products and Vycon has done this already with the two existing products which we started developing in 04 and launched in the middle of 06. So we have relative experience in doing that and we will deploy those experiences into this programme to ensure that it's about a 15 to 18 month effort.
ACI: You have experience in managing growth companies. How is that experience going to help you today?
TA: I have experience in managing growth companies. I also have significant experience in technology industries, where I've spent fifteen years most recently as an operating executive at Emerson Electric, a US conglomerate that's global in scale, and was responsible for a sizeable segment of the network power business, which is large products similar to what Vycon is doing in the sector. But the whole product launch dynamics are pretty comparable. Also before that, I spent ten years working for two smaller enterprises that did a lot of product developments and grew from being a start-up to a sizeable business and one of them was doing business with Emerson. So I've had the experience of having been on both sides. What we want to do now is use my experience, along with the people I've added on the team and some had worked with me before in other businesses. But I also have access to resources in the area - the Los Angeles basin area - and have done similar projects in other places on very fast growth. So my experience is relative to the company. Two things we're going to see going forward is scaling up larger products and developing yet another product and scaling up production as we sell more of the smaller parts and eventually have the larger product to sell to the market. So relative experience is quite applicable here.
ACI: What should investors be looking for in terms of news flow coming from you today?
TA: We expect that our transactions with customers - as we are now in the sales mode, if you will, of the two products that we launched - to be frequent, because some customers will end up buying very frequently from us, a unit here, a unit there. Others may buy several units or may reach an agreement to do a global retrofit programme, so we expect, as we navigate our way and close those kinds of transactions, that there'll be some news flows in that regards. And we also think that there's going to be news flow on us, maybe getting some additional certification or testing, because we're trying to take the products into… pushing the limits into some other applications, like the crane application where we want to validate a certain amount of fuel savings if they reduce the generator size. Things of that nature we think could be possibly on the news flow coming up. And also some news flow relating to how are we going down the path on executing the product development scale-up plan that I just talked about earlier.
ACI: Tony, thank you very much for this update on Vycon. We all look forward to hearing more about Vycon in the months ahead
TA: Thanks for having us, we're really excited about what we're doing and we appreciate the opportunity to talk about the company. Thank you very much.
